Estate Planning to Protect Generational Wealth Transfers: Lessons from The Gilded Age

HBO’s The Gilded Age dramatizes the privileged lives of some of America’s wealthiest families in late 19th century New York City. In U.S. history, the Gilded Age covers the 1870s to the late 1890s. Rapid economic growth defined this era, which fostered both materialistic excess and political corruption – and makes for the perfect dramatic screenplay. Famous families from this period include the Rockefellers, Carnegies, Vanderbilts, and Astors.

Julian Fellowes, who is best known for Downton Abbey, created this newer historical drama series. While Downton followed the Crawfords, an upper-class titled and landed-gentry family, The Gilded Age highlights America’s nouveau riche. Its protagonists acquired extreme wealth from new and booming industries such as shipping, railroads, oil, and banking. These individuals thus did not inherit their fortunes from generations of titled (male) heirs – they built them from the ground up.

Gilded Age magnates left industrial, real estate, and cultural legacies that forever changed American society. Nearly a century and a half later, many American landmarks still bear their names, such as Rockefeller Center, Carnegie Hall, Vanderbilt University, and the Waldorf Astoria. Yet, remarkably, many of these historical elite failed to leave a similar legacy of generational wealth.

For example, once America’s second wealthiest family, the Vanderbilts built their fortune through a shipping and railroad empire, with their patriarch Cornelius at the helm. At its height, the family’s wealth was estimated at $200 million in 1877, which is equivalent to $105 billion today. Despite its potential for astronomical growth, the wealth dwindled with each generation. In 2019, the Vanderbilt’s celebrity heir, CNN’s Anderson Cooper, inherited only $1.5 million from his mother, Gloria, Cornelius Vanderbilt’s great-great-granddaughter. Even before her death, Cooper had been vocal that despite the Vanderbilt name, financial legacy, and wide speculation about a lasting, massive fortune, there “was no trust fund.”¹

The exact terms of each Vanderbilt estate plan are not entirely known; however, it is understood that several factors depleted the family fortune. Notably, the Vanderbilts lacked a strategic and long-lasting estate plan. This permitted directionless, spendthrift heirs and unchecked family conflicts to drain assets over time. Likewise, the Pulitzer family fortune, of the same gilded era, did not survive ongoing generational transfers. Joseph Pulitzer is known for the Pulitzer Prize and for starting the renowned Columbia Journalism School. Yet, only two generations after his death, a grandson infamously lost the bulk of the fortune in a Florida orange grove investment, having failed to diversify the once vast estate.

These financial falls from grace are not simply hit television fodder. The historical failure to sustain generational wealth can greatly inform modern estate planning. For example, the Vanderbilts highlight the missed opportunity to control excess spending by future generations. Well-thought-out trust and estate plans can limit such expenses that go beyond what is necessary for a beneficiary’s support, maintenance, medical care, and education. Trustees or trust protectors can consider a beneficiary’s accustomed standard of living, income, and other resources, and even philanthropic goals, while protecting against lavish waste. Chosen well, these fiduciaries become caretakers of a family’s financial legacy. Critically, it is not enough to appoint a responsible trustee or trustees upfront. Trustee succession provisions are equally important. Purposeful succession terms protect from any unexpected transfer of trustee power to an inadequate or non-vetted successor.

Indeed, not all Gilded Age families squandered the family riches. The Rockefellers are particularly lauded for their generational wealth preservation. John D. Rockefeller, an American oil industry business magnate, founded Standard Oil Company in 1870, now ExxonMobil and Chevron. The Rockefellers used irrevocable trusts to hold most of their assets. This prevented wasteful spending by future heirs. If drafted correctly, such trusts may also remove assets from one’s taxable estate, eliminating the need for heirs to pay large future estate taxes. The Rockefellers also established business succession plans and incorporated philanthropic goals that its beneficiaries continue to abide by today. Likewise, the Mellon family (of BNY Mellon bank), has maintained an estimated $12 billion fortune since Thomas Mellon’s death in 1908. Thomas Mellon’s estate plan apparently both preserved wealth transfers through strategic planning and encouraged entrepreneurship through protected investments in the next generation.

You need not be a Rockefeller or Mellon to safeguard generational wealth transfer. Modern estate planning is not, nor ever was, just for the gilded. Both then and now, a sound legal structure with financial safeguards is key. A strategic estate plan, including trust planning, protects family asset transfers, regardless of the amount. And a trust need not be irrevocable to ensure generational stability. For many families, education regarding wealth transfer, capital preservation, and family core values and goals can prepare the next generation. Bequeathing such financial literacy is as critical as giving the dollars themselves. For example, family financial summits or other similar family meetings allow older generations to share financial goals, expectations about inheritance, responsibilities, and core family goals.

Generation-skipping trust (GST) planning can also help preserve generational wealth transfer. GSTs permit you to leave assets to grandchildren or other beneficiaries at least 37.5 years younger. Skipping a generation can avoid paying federal estate taxes twice on inherited assets — i.e., when passing to both the second generation and third generation. Further, trust provisions can offer longstanding creditor protection. Most creditors, including divorcing parties, cannot access trust-protected funds. And while certain rules prevent perpetual trusts (e.g., the infamous Rule Against Perpetuities), many states have either repealed or amended such laws. Estate planners can help navigate such jurisdictional limitations and draft plans for future generations.

Although it could certainly support another hit HBO series, estate planners are not clairvoyants with trusts and wills as their crystal balls. But a forward-thinking estate plan can nonetheless protect assets from future generational unknowns, rogue beneficiaries, or even poor financial decisions from well-meaning heirs. Estate planning should consider immediate wealth transfer and generational wealth preservation, education, and financial management. Gilded or not, this gift of a sound financial legacy will benefit your future generations to come.

¹ Zurilla, Christie, Los Angeles Times, July 2, 2019, Gloria Vanderbilt told Anderson Cooper not to expect a trust fund. He got the estate instead.